Cloud Computing: The Sky is the Limit

  • Like on Facebook
  • Share on Google+
  • Share on LinkedIn

Earlier this week, Rackspace Hosting Inc. (NYSE:RAX) reported impressive fourth quarter earnings.  Net income for the tech company surged 85 percent to $25 million, while revenue increased almost 32 percent.  The financial results continue to highlight the potential of cloud computing services.

Shares of Rackspace reached as high as $56.94 on Tuesday, representing a new all-time high since going public in 2008.  The company competes with Amazon (NASDAQ:AMZN) Web Services, which allows customers to rent computing power and store applications on its servers.  According to the latest financial results, Rackspace’s revenue in this area increased more than 80 percent.

Year-to-date, shares of Rackspace have jumped nearly 30 percent.  Shares of performed extremely well since its IPO.  Bloomberg explains, “The stock, which debuted in 2008, has surged more than 10-fold in value in the past three years. That’s more than Apple Inc. (NASDAQ:AAPL) can say, its stock is up 407 percent during that stretch. In fact, not a single company in the S&P 500 (NYSEARCA:SPY) has matched Rackspace’s three-year performance, with Wyndham Worldwide Corp. (NYSE:WYN) coming the closest, at 959 percent.

Don’t Miss: Last Minute Stock Ideas for Valentine’s Day

Major tech companies such as International Business Machines (NYSE:IBM) and Oracle Corp. (NASDAQ:ORCL) are also cashing in on cloud computing.  In fact, 80 percent of Fortune 500 companies use IBM cloud computing capabilities.  Meanwhile, Oracle recently agreed to purchase Taleo Corp., a maker of web-based software for recruiting employees, for a hefty price of $1.9 billion.  Last month, Oracle also purchased customer service cloud company RightNow Technologies for $1.5 billion.  Analyst Rick Sherlund from Nomura Securities said, “They want to own this space. They want to reinvent themselves for the cloud, they are buying a position in the cloud through consolidation.”

Cloud computing is also have an effect on the medical field.  UnitedHealth Group’s (NYSE:UNH) Optum business is launching a service that allows doctors to access information about patients over the internet.  Instead of relying on a specific computer to access information, doctors will be able to use medical records on portable devices like smartphones or tablet computers.

The Associated Press reports, “Optum worked with Cisco (NASDAQ:CSCO), IBM and Hewlett-Packard Co. (NYSE:HPQ) among others, to design the cloud and is launching a set of apps called Optum Care Suite to help providers use it.  But it also is encouraging providers to design their own applications for the cloud as well.  Considering UnitedHealth Group is the largest health insurer in the United States, serving approximately 70 million individuals, the potential of cloud computing in the medical field could have a dramatic impact for years to come.

Investor Insight: Move Over PC, Tablets are Taking Over

To contact the reporter on this story: Eric McWhinnie at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com

More Articles About:
Yahoo Finance, Harvard Business Review, Market Watch, The Wall St. Journal, Financial Times, CNN Money, Fox Business